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When do firms generate? Evidence on in-house electricity supply in Africa

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  • Steinbuks, J.
  • Foster, V.

Abstract

This paper attempts to identify the underlying causes and costs of own generation of electric power in Africa. Rigorous empirical analysis of 8483 currently operating firms in 25 African countries shows that the prevalence of own generation would remain high (at around 20%) even if power supplies were perfectly reliable, suggesting that other factors such as firms' size, emergency back-up and export regulations play a critical role in the decision to own a generator. The costs of own-generation are about three times as high as the price of purchasing (subsidized) electricity from the public grid. However, because these generators only operate a small fraction of the time, they do not greatly affect the overall average cost of power to industry. The benefits of generator ownership are also substantial. Firms with their own generators report a value of lost load of less than US$50 per hour, compared with more than US$150 per hour for those without. Nevertheless, when costs and benefits are considered side by side, the balance is not found to be significantly positive.

Suggested Citation

  • Steinbuks, J. & Foster, V., 2010. "When do firms generate? Evidence on in-house electricity supply in Africa," Energy Economics, Elsevier, vol. 32(3), pages 505-514, May.
  • Handle: RePEc:eee:eneeco:v:32:y:2010:i:3:p:505-514
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    References listed on IDEAS

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    1. Foster, Vivien & Steinbuks, Jevgenijs, 2009. "Paying the price for unreliable power supplies : in-house generation of electricity by firms in Africa," Policy Research Working Paper Series 4913, The World Bank.
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    Cited by:

    1. Antonio Carvalho, 2016. "Delays in Connecting Firms to Electricity: What Matters?," CEERP Working Paper Series 003, Centre for Energy Economics Research and Policy, Heriot-Watt University.
    2. Saule Baurzhan & Glenn P. Jenkins, 2017. "On-Grid Solar PV versus Diesel Electricity Generation in Sub-Saharan Africa: Economics and GHG Emissions," Sustainability, MDPI, Open Access Journal, vol. 9(3), pages 1-15, March.
    3. Richard S. J. Tol, 2015. "Economic impacts of climate change," Working Paper Series 7515, Department of Economics, University of Sussex.
    4. Richard S J Tol, 2018. "The Economic Impacts of Climate Change," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 12(1), pages 4-25.
    5. Mubashir Qasim & Koji Kotani, 2014. "An empirical analysis of energy shortage in Pakistan," Asia-Pacific Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 21(1), pages 137-166, June.
    6. Morgan Bazilian & Patrick Nussbaumer & Hans-Holger Rogner & Abeeku Brew-Hammond & Vivien Foster & Shonali Pachauri & Eric Williams & Mark Howells & Philippe Niyongabo & Lawrence Musaba & Brian Ó Galla, 2011. "Energy Access Scenarios to 2030 for the Power Sector in Sub-Saharan Africa," Working Papers 2011.68, Fondazione Eni Enrico Mattei.
    7. Bazilian, Morgan & Onyeji, Ijeoma, 2012. "Fossil fuel subsidy removal and inadequate public power supply: Implications for businesses," Energy Policy, Elsevier, vol. 45(C), pages 1-5.
    8. Mensah, Justice Tei, 2016. "Bring Back our Light: Power Outages and Industrial Performance in Sub-Saharan Africa," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 236587, Agricultural and Applied Economics Association.
    9. Stephen O'Connell & Allan Collard-Wexler & Hunt Allcott, 2015. "How Do Electricity Shortages A," 2015 Meeting Papers 159, Society for Economic Dynamics.
    10. Hunt Allcott & Allan Collard-Wexler & Stephen D. O'Connell, 2016. "How Do Electricity Shortages Affect Industry? Evidence from India," American Economic Review, American Economic Association, vol. 106(3), pages 587-624, March.
    11. Justice Tei Mensah, 2016. "Bring Back Our Light: Power Outages and Industrial Performance in Sub-Saharan Africa," Working Papers 2016.20, FAERE - French Association of Environmental and Resource Economists.
    12. Lamessa Tariku ABDISA, 2018. "Power Outages, its Economic Cost and Firm Performance: Evidence from Ethiopia," Departmental Working Papers 2018-01, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    13. Oseni, Musiliu O. & Pollitt, Michael G., 2015. "A firm-level analysis of outage loss differentials and self-generation: Evidence from African business enterprises," Energy Economics, Elsevier, vol. 52(PB), pages 277-286.
    14. Jonathan Timmis, 2013. "Internet Adoption and Firm Exports in Developing Economies," Discussion Papers 2013-05, University of Nottingham, GEP.
    15. Kenneth Lee & Edward Miguel & Catherine Wolfram, 2016. "Experimental Evidence on the Demand for and Costs of Rural Electrification," NBER Working Papers 22292, National Bureau of Economic Research, Inc.
    16. Jacopo Bonan & Stefano Pareglio & Massimo Tavoni, 2014. "Access to Modern Energy: a Review of Impact Evaluations," Working Papers 2014.96, Fondazione Eni Enrico Mattei.
    17. Musiliu 0. Oseni & Michael G. Pollitt, 2013. "The Economic Costs of Unsupplied Electricty: Evidence from Backup Generation among African Firms," Cambridge Working Papers in Economics 1351, Faculty of Economics, University of Cambridge.

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